Premium paid by Developers for Affordable Housing should be brought down
Sunil Mantri, President, NAREDCO
Interviewer : Sandeep Pattnaik
Sunil Mantri, President, NAREDCO

Union Government should reduce the premium paid by developers in case of affordable housing, to address the urgency in meeting the shortfall in the Country, says Sunil Mantri, President, National Real Estate Development Council [NAREDCO]. Besides, there is a need to give thrust to PPP projects, to boost private developers to go for more housing projects in this category. In a telephonic chat with Sandeep Pattnaik of, Mantri shared his thought about the issues pertaining to the beleaguered sector. Excerpts.


1.  There exists a lack of euphoria among the real estate developers while it comes to launching new projects, be it residential or commercial. Issues are many to be resolved. What are the core issues that need to be addressed? Do you think, the newly sworn in Maharashtra Govt and in the Centre as well is doing enough to achieve the mission i.e. “Housing for All”? 


A.    Clarity in government policy somehow lacking, which is demotivating developers. Basically the builders have to fork out a huge premium to the Government, for a building plan approval in the form of stamp duty, VAT and Service Tax etc, which escalates the inventory cost. This is at a time when the sector requires huge fund inflows. Government might go for formulating schemes like default payment plans, instalment facilities for developers as it is doing in case of financing agri loans, where moratorium and waiver like facilities are provided to farmers in case of crisis.   



2. NAREDCO as an apex body of real estate developers has been demanding Industry Status to the sector for long. What’s the initiative so far in that front? If Infra status at all is regarded to the sector, how it is going to be beneficial for developers in the long run?


A.    We have appealed to the Govt for giving infra status to the sector, which if accorded, will channelize long term funding to the sector. At present, only short-term funding is available for real estate projects and that too only 4.19% of the bank’s total advance book is allocated for commercial real estate advance.



3.      What more need to be done to enthuse foreign investment in to the sector, apart from the FDI relaxation done by the Government in the recent past?

A.    Relaxation of FDI in real estate is indeed a good step. But still the sector is not open to External Commercial Borrowing [ECB] route for accessing of huge foreign funding in to the sector.



4.      Above 90% shortfall in ‘Affordable Housing’ category remains in EWS and LIG category. What needs to be done to encourage private developers to come forward to address the issue?


A.    Government should encourage Public-Private-Partnership model to go for affordable housing projects, so that the land cost can be shared both by the Government and the private developers. In the existing scenario, the Government which has huge surplus land bank under its kitty, is selling land in open market to the developers (at around Rs 100 crore/acre in urban areas in Maharashtra) , by which the later has to invest a big chunk of their available fund, further squeezing their pockets. Secondly, premium paid by developers needs to be relaxed (as I have said before) in case of affordable housing, which is at par with the luxury housing projects at present. Besides, there should be mechanism for speedy on-line approval for various clearances required for housing projects.



5.      What is your view about the present Interest rate scenario in the realty sector? Should it be brought down in sync with the gradual decrease in Inflation?


A.    In my view, the interest rate for housing loan should be gradually relaxed to hover at around 7%, easing developers to go for more borrowing in their projects.  



6.      Real Estate Companies performance has been lackluster, as they are over-leveraged and almost selling their assets like anything to reduce their debt. Then what should be the way out to revive these Cos?


More windows should be open for capital infusion into the real estate and hospitality infra companies by way of private equity, IPOs. Another basic issue (as I have specified earlier), free trading of land should be discouraged in open market, as it inflate cost for real estate projects (land being a major component of any realty project).

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